While 2017 was again dominated by geopolitical risk, none of that was allowed to seep into financial markets. Reflation trades prevail. Yet, the frustration for central banks is that recoveries are failing to generate enough inflation to trigger their usual reaction functions.

If they truly want to get their ‘powder’ back, in terms of reclaiming policy rates while core inflation stays tame, the spirit, if not the letter, of the Fed’s dual mandate may make sense for others too.

While this may be deemed ‘hawkish’, it would be more than offset if we need to brace for more political distrust: with the threat of beggar-thy-neighbour policies - from the US to an upsurge of anti-European populism - a major risk still unpriced by markets.

Amid these forces, our macro outlook is based on five core beliefs. First, despite ‘muscle flexing’, the road to normalisation will be long & slow. Real rates will stay negative, with ‘peak’ rates ending up below what we’re used to. The question is how to drain the liquidity ‘sink’ without unintended consequences.